Energy Efficiency

Day Month Year

By : Rafikh Ismail

: Senior Account Manager

: Green Industries Strategic Business Unit

09 May 2013

Contents Page

South Africa’s Energy Mix

Energy Efficiency

Funds Available: GEEF and AfD

Funded Cases

Conclusion

South Africa: Current Market and Energy Situation

• Since the South African economy largely relies on coal reserves for electricity, many opportunities exist for Renewable energy (RE) and Energy Efficiency (EE) improvements.

• Currently, future energy supply is not expected to be sufficient to match the anticipated demand, and increased pressure on price and energy security, force industry players to focus on green initiatives (mainly RE and EE).

• Recurring power outages since early 2008have highlighted the fact that electricity generation is unable to keep pace with demand.

In the light of adversity comes In the light of adversity comes In the light of adversity comes In the light of adversity comes opportunity!!!opportunity!!!opportunity!!!opportunity!!!

South Africa’s Current Energy Mix

• The South African (SA) economy is dominated by energy intensive industry.

• SA is also one of the larger emitters of CO2 in the world. This is primarily due to the fact that 86% of its electricity generation is coal based.

Eskom Installed Generation Capacity MW

Coal 37755 MW

OCGT 2426 MW

Nucler 1930 MW

ConventionalHydro 600MW

Pumped Hydro1400MW

Wind 3MW

South Africa’s Integrated Resource Plan (IRP2010)

According to the IRP2010 a

total of 19 GW of overall

electricity will be

generated from RE,

estimated to cost close

to R500bn over the next

20 years up to 2030

(close to R100bn over

the next 5 years).

IDC’s targeted investment

over the next 5 years is

R25bn (including

manufacturing of green

components for green

industries).

Future Generation Planned by 2030

Coal 6300 MW

OCGT 3900 MW

Nucler 9600 MW

Hydro 2600 MW

CCGT 2400 MW

Wind 8400MW

Solar PV 8400 MW

CSP 1000 MW

Driving opportunities to develop

the Green economy from an

energy generation perspective�

Contents Page

South Africa’s Energy Mix

Energy Efficiency

Funds Available: GEEF and AfD

Funded Cases

Conclusion

Energy Efficiency

Background

• South Africa is the largest contributor to the African Continent’s GHG emissions. Due to the fact that South Africa has an extremely energy intensive economy and a very high dependence on coal for the generation of primary energy, South Africa is one of the most carbon emission-intensive countries in the World.

• This, coupled with historically low electricity prices, has resulted in substantial energy inefficiencies throughout the various sectors in our economy. South Africa could benefit substantially from the implementation of renewable energy to address the challenges towards clean energy, energy efficiency and greenhouse gas (GHG) mitigation.

Energy efficiencyEnergy efficiency

Heat, Electricity & building

efficiency

Cleaner production / Industrial

Efficiency

Transport

Efficiency

Efficient lighting

SWH & Heat pumps

Energy monitoring

Metering

Industrial processes & efficiency

Retrofitting of buildings

High efficiency engines

Energy Audits

Energy Servicing

Companies

(ESCOs)

Research &

associations

Carbon Markets

Certification &

verification

Services related

to EE

Services related

to EE

Energy Efficiency

Examples of EE interventionsExamples of EE interventions

Com

merc

ial and Industria

l

• Office & Business Parks and Office Blocks

• Industrial Parks

Dom

estic H

ousehold

s • SWH

• Heat Pumps

• Lighting

• Spatial Heating

Why is there reluctance to make the move???

Reluctance in the market is

due to:

EE not business as

usual

Uncertainty: Lack of

awareness

Capital Expenditure Required – not

necessary budgeted for

Relatively Low Tariffs compared to international benchmarks

Challenges iro Energy Costs and Availability : Drivers to move to EE (Carrot & Stick Rational)

Rising Energy Cost is greater than:

• Inflation

• Increases in domestic households disposable income

• Increases in average Turnovers and Profitability in companies

Positives in the market

• Incentive scheme through the Eskom’s Demand Side management programmes supporting the move to cleaner production and Energy Efficiency

Industry EnvironmentEnergy Efficiency

Change in

environment

Implications for Industry and SBU Sector Strategies

Energy Efficiency

Increased electricity

prices (Most recent

increase approved

8%pa in MYPD3)

Increased focus on EE interventions, IDC funding and

implementation of EE through strategic alignment and action

plans towards existing and new clients.

Eskom’s DSM target

to reduce 6 000MW on

grid through DSM

interventions

DSM has targets over

the next 3 years of:

Demand 1074 MW

Opportunity to work closely with Eskom to support and funding

various DSM programs i.e. SWH roll out and own use co-

generation

Implementation of

National Solar Water

Heating strategy

Drive to increase the roll out of SWH creates opportunities to

fund manufacturing capacity and training of installers (skills

development)

Energy Efficiency Solutions

EE Solution

Incentives –Though Rebates,

Performance Contracting

Funding : Concessional rates

available

Market and Technology Awareness

Types of projects

Performance Contracting:

Lighting Retrofits

HVAC

Shower Heads

•Solar Water Heaters

•High Pressure SWH (Municipal Roll Outs, Corporate Roll Outs) – Projects Currently under development

•Low Pressure SWH (Current situation (Allocation Basis) and moving towards Commercial Contracting)

Self Use PV

Ground Mounted – Off Grid Mines using Diesel Gen Sets

Roof Top – Textile Companies , Agro businesses (Pack Houses) **Challenges on host Company

•Metering – (Municipality Roll Outs only) - Load Management Systems (Virtual Power Stations) & Billing Apps

Energy Efficiency –Solar Water Heaters

Minister: Target of 1 million SWH in next 3 years, saving 4700GWH by 2014

• Challenges

– Lack of certainty around rebates

– Affordability constraints of domestic households

– Capital Costs too high

– Too Many conflicting messaged about the technologies

– Funding to ESCOs – weak financial structures

– Awareness/ Lack of reliable information or case studies

Photo Voltaic Technology

Roof Top PV Installations:

• IDM Support through a rebate decreasing pay back period of technology

• Cost of Technology of the decline

• Grid Parity pricing would be reached on the PV systems within the next 18 to 24 months

Challenges

• Lack of formalised Net Metering legislation

• Lack of awareness

Opportunities

• South Africa having very good solar irradiation that supports this technology

• Excellent funding models at attractive interest rates and long debt tenures

EE Technologies used in DSM Projects

• LED’s – Light Emitting Diodes • Low flow / Flow restricted Shower Heads

• CFL’s – Compact Fluorescent Lamps

• Geyser Blankets

• Geyser / Pool Timers

• Retrofitting of magnetic to electronic ballasts & T8 to T5 Fluorescent Lamp replacement

• Solar Water Heaters

Energy Efficiency – Industrial Processes

• Opportunities

– IDC Investments – Current Portfolio

– IDC Pipeline – New Potential Investments

– IDC – Successful Ex-Clients

– Other industries, specifically mining, metals and chemicals

– Marketing opportunities: Conferences and Events

• Challenges

– Local ESCOs – skills and financial stability

– Lack of credibility of ESCOs

– Lack of reliable information or case studies

– Project financing (ring fencing projects within an existing business model)

– EE Not business as usual

– Industry standards for industrial processes

– Lack of awareness

• Specific actions

– Develop IDC in-house knowledge on technologies available for process EE awareness (training)

– Develop case study for Boiler Change / Retrofit

– Road show to SBUs on potential, presenting case studies (Increasing the awareness of account managers throughout the IDC

– Identification of potential IDC clients with large industrial processing

– Set EE targets for new IDC investments

– Create generic financial model to illustrate

– Understand and communicate incentives and tax structures

– Developing Measurement and Verification systems to monitor KFW investments (GFA Consultants to implement)

– Lessons learnt globally through technical assistance and training by GFA

Energy Efficiency – Industrial Processes

• Specific Actions (Cont.)– Develop legal skills re contracts (i.e. energy saving

models)

– Identify competent “developers” or ESCOs

– Access to subsidised funding:

� Clean Technology fund/ IFC

� EE specific credit lines

� Eskom DSM program

� KFW Credit Line

Energy Efficiency – Buildings

Buildings offer the most cost-effective solution to GHG elimination

• Projects identified

– Government Buildings

– Municipal Buildings

– Blue Chip Corporates

• Working with Escos

– Support of the ESCO Market – Recently concluded ESCO Market Study

–• Challenges

– Local ESCOs – skills and financial stability

– Lack of reliable information or case studies

– Biased benefit accrual between landlord and lessee for buildings

– Project financing (ring fence / on- balance sheet

– Industry standards for commercial buildings

– Industry standards for industrial processes

– Lack of awareness of the benefits

Energy Efficiency in Buildings - examples

Others

Lights

Cooling

Heating

Reference Case0

20

40

60

80

100%

Energy consumption

- Madrid BuildingCategory

• Electronics • Reduced standby consumption

• LCD screens

• Heating

• Cooking

• Water Heating

• Optimised heating technology (district

heating, biomass, solar)

• Improved ovens

• Induction technology

• Water-saving appliances

• Solar-heated water

• Cooling

• Aircon

• Improved placement of appliances (e.g.

shaded)

• Installation of doors/shutters

• Natural-cooling systems in new buildings

• Regular maintenance

• Solar-cooling systems

• Lighting • Electronic ballasts

• Better daylight use

• Increased CFL/LED use

Examples of measures/technology

Source: Energy Partners

Contents Page

South Africa’s Energy Mix

Energy Efficiency

Funds Available: GEEF and AfD

Funded Cases

Conclusion

Green Energy Efficiency Fund

KfW

Concessional debt funding

Technical assistance grant

IDC

Develop Green Industries

Capacity building in clean energy finance

Addresses market failure and funding barriersReduced interest loan -Prime less 2%

Long payment term ( up to 15 years)

Green Energy Efficiency Fund

Stimulate energy efficiency and renewable energy investment

Technical assistance to: -identify energy efficiency and renewable energy opportunities

-calculate the economic and financial benefits

-support the selection of eligible equipment and enhanced performance technologies.

Promote long term business competitiveness

-Modernisation of businesses

-Increased company profitability

-Improved product quality and production capacity

-Lower vulnerability to increasing energy prices.

Contribute to global climate protection

-Measurement of energy savings and carbon reduction

-Enhanced company image due to contribution to reduction of carbon footprint.

Energy Efficiency: 2012/13 ReviewA snap shot of the GEEF to date…

10Number of

Deals approved

325,905 avoided CO2/year

-Technical Support

11 Walk through energy audits

conducted

4 detailed energy audits (investment

grade)

- 12 SBUs and Regional Offices Trained

on GEEF and EE

-ESCO Market Study

- Energy Efficiency Conference

Programme supported by the German Cooperation and Development Ministry

Green Energy Efficiency Fund- Competitiveness through energy savings

Highlights

R145m

Amount committed

ca 25% of fund

SWH

Energy Performance Contracts

Cogeneration

Waste to Energy

Energy Efficiency

& GEEF

More Energy Efficiency and Renewable Energy Finance in the pipeline

Capital Source AFD

Type of funding Credit Line

Amount EURO 40 million

Targeted Projects Greenfields Energy Efficiency, Small Scale Renewable Energy sold under PPA and

Refurbishment of RE plants

Project Size ZAR 1 – 100 million total investment

AFD to finance up to 85% of total investment costs

“IDC Gearing Ratio’s and Mandate is overarching”

Pricing Fixed rate of 10% or

Prime less 1%

Loan Term Up to 12 years

Green Economy Catalyst through EE

Energy Efficiency:

• IDC has created an enabling environment by securing cheaper funding, with long debt tenures to act as a catalyst in the Energy Efficiency Markets.

• Green Energy Efficiency Fund was launched recently that offers the market debt at concessionary rates with debt tenures up to 15 years by partnering with the German DFI – KfW.

• IDC has structured the repayment of these loans to effectively match the savings profile of the technology installed. eg. On a Roof Top PV the savings over 15 years are equivalent to the debt service repayment and hence the facility of 15 years is then proposed. Hence not an out of pocket expense for the company.

Developing other sectors of the Green Economy through innovation ...

Repayment from savings

• The idea of structuring the repayment is to ensure that the debt repayment is less than the saving achieved as a result of the EE intervention.

0

2

4

6

8

10

12

14

16

Savings

DebtRepayment

Contents Page

South Africa’s Energy Mix

Energy Efficiency

Funds Available: GEEF and AfD

Funded Cases

Conclusion

Funded cases

• A Cape Town-based company that produces sport wear and leisurewear under license to an international brand.

• The company has embarked on a project to install a grid connected (grid-tied) rooftop PV system to generate 25% of the company’s annual electricity requirement

“Electricity accounts for more than 90% of our carbon emissions and is a scarce resource that is vital to the successful operation of our business. We are confident that the solar installation will generate between 30 – 40% of our energy requirement, thereby reducing our carbon footprint, save money and improve our sustainability into the future.”

William Hughes, MD, Impahla Clothing

Sector Textile Industry

Region Western Cape

Goals Reduced reliance on coal

based electricity from grid

Investments Solar Photovoltaic (PV)

system – 30kW peak

Financial

Savings

Investment cost covered by

energy and cost savings

Other

Benefits

Positive image as a

progressive environmentally

friendly company

CO2

Reduction

50 CO2 tons per annum

Case Study 1: 25% Reduction in Grid Electricity Consumption by Installing a Solar Photovoltaic (PV) System

• The chemical production company wants to use the waste gas as fuel for a 7.8 MW CHP plant to replace part of the power supply from the grid.

• This results in 18% savings from using the waste gas to feed the CHP plant.

“The company spends close to R7-million on electricity a month, and this new co-generation plant will cut this bill by about 20%. The additional 8 MW capacity will enable the company to operate at full production compared with the 70% capacity because of electricity constraints. „

Claudio Siracusano, GM, SACC

Sector Chemical Industry

Region KwaZulu-Natal/South Africa

Goals Reduced reliance on coal

based electricity from grid

Investments • 4 co-generation units

• Scrubber plant

Financial

Savings

• Investment cost covered

by energy and cost savings

Other

Benefits

Increased reliability from

own energy supply

CO2

Reduction

46,000 CO2 tons per annum

Case Study 2: 18% Energy Savings from Utilisation ofWaste Gas to feed a Combined Heat and Power (CHP) Plant

IDC project example: Solar Water Heaters in rural areas

• IDC is proud to be associated with the 1st Low Pressure Solar Water Heater Programmatic CDM project to be registered worldwide at the UNFCCC.

• The project has resulted in excess of 800 jobs for the unemployed in these impoverished areas, the up-liftment of these people lives who for the first time ever are enjoying running hot water on-tap.

LPSWH CDM Registered Project

• The project has resulted in more than 70,000 LPSWH being installed nationally to the impoverished communities for free. The innovative funding model was facilitated through the CER revenue, A Rebate for Energy Efficiency and the bridging finance facility from the IDC. Ref: Diagram

ESCO

IDC

(Industrial Development Corporation)Carbon Credit Off-Taker

CarbonDevelopers

ESKOM

REBATE PAID

Municipality

Households (Beneficiaries)

Equipment Suppliers

ERPA

Prepayment Guarantee

MOU Signed

Prepayment (Guaranteed By the IDC)

Net PrepaymentAfter Costs

Free Direct Low Pressure Solar Water Heater

Cession Of Rebate and Cession of the Carbon Credits

Funding of the working capital requirement

Contents Page

South Africa’s Energy Mix

Energy Efficiency

Funds Available: GEEF and AfD

Funded Cases

Conclusion

Conclusion

• Pro-active approach to develop Green Industries

• Renewable energy

• Energy efficiency

• Fuel based green energy

• Emission and pollution management

• Bio fuels

• As well as localisation opportunities

• Focus on early phase project development;

• Develop specific funding interventions;

• Support and development of an emerging industry at various level.

• Value chain approach with an objective to develop a long term sustainable

industry.

Day Month Year

The Industrial Development Corporation

19 Fredman Drive, Sandown

PO Box 784055, Sandton, 2146

South Africa

Telephone (011) 269 3000

Facsimile (011) 269 2116

E-mail callcentre@idc.co.za

Thank You!

Any Questions?

RAFIKH ISMAIL

+2711 269 3297+2776 984 9893rafikhi@idc.co.za